Amazon is voluntarily taking limited responsibility up to $1,000 for defective goods that cause property damage or personal injury to its customers, a partial retreat from its longtime policy of shifting blame to sellers on its platform.
“We’re excited that these innovations create a more trustworthy shopping and selling experience for customers and sellers in our store,” the company said in an unsigned post on its corporate blog.
For years, Amazon has argued – mostly successfully – that sellers are responsible for damages and injuries resulting from their products, and the courts have largely ruled in its favor.
But a crack appeared in that armor last year when a California appeals court held that Amazon could be liable for goods it stores and ships through its fulfillment program.
The stakes were also raised last month when the U.S. Consumer Product Safety Commission sued Amazon, asking a court to rule that the company is responsible for products sold by its sellers and must cooperate with the agency’s mandatory recalls.
“[The action] was a huge step forward for this small agency,” said Acting CPSC Chairman Robert Adler. “But it’s a huge step across a vast desert—we must grapple with how to deal with these massive third-party platforms more efficiently, and how best to protect the American consumers who rely on them.”
Products named in the suit include 24,000 faulty carbon monoxide detectors, numerous children’s sleepwear garments that are in violation of the flammable fabric safety, and nearly 400,000 hair dryers sold without the required immersion protection devices that protect consumers against shock and electrocution.
Amazon's decision to voluntarily pay small, verified claims of $1,000 or less is expected to reduce the number of lawsuits filed by consumers by about 80%, the company said.
While the program may speed up small payments to consumers, it doesn't do much for customers who suffer major damage or injury. One recent case, for example, involved a woman who lost an eye when a retractable dog leash snapped and hit her in the face.
In those cases, at least for now, consumers will be stuck fighting their claims through the courts.
Sellers not joyful
Do I see it right? I’m going to get forced to get some kind of insurance, or I’ll get in trouble? -- An Amazon seller in an online forum
Sellers on Amazon's platform aren't greeting the news joyfully either. They fear a flood of minor claims that will cost them time and money.
"I don’t like this one bit," said a poster calling himself AmazonSeller 99 in an online forum. "Many policies are bad for sellers but this is the first one that I’ve seen which could potentially be a business killer. I think they need to really expand on this more and explain how this whole process is going to work."
The reference to insurance involves another new program, called Amazon Insurance Accelerator, a network of insurance providers that sellers can access if they choose, and an updated policy requiring more merchants to obtain product liability insurance. Amazon itself is not offering this insurance, it said.
A flea market, not a store
The turmoil surrounding damages has to do with the nature of Amazon's business. It calls itself a retailer and most consumers think of it as a huge online store. But a store – like Target or Walmart – sells products that it has reviewed and purchased from the manufacturer or distributors.
Amazon, on the other hand, mostly provides a platform for third-party sellers, many of them small home-based businesses. In that way, it's more similar to eBay than to the online sites for actual stores, like Macy's or Kohls.
Through its fulfillment service, Amazon stores and ships many of the goods sold on its site but argues that since it does not purchase the goods from a wholesaler, it is merely acting as a facilitator between buyer and seller.
Whether that approach will continue to work for the company depends on how the courts view its argument in the future and whether the CPSC is successful in its lawsuit.